In the Simple Aggregate Expenditure Model Where All Components of Aggregate

question 203

Multiple Choice

In the simple aggregate expenditure model where all components of aggregate expenditure are autonomous except consumption, suppose when autonomous aggregate expenditures rise by $500 billion, equilibrium real GDP increases by $2,500 billion. Which of the following statements is true?

• A) The MPS = 0.8.
• B) The MPC = 0.2
• C) The MPS = 0.2.
• D) The MPC = 5.

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